You may have heard me going on recently about the strength of the Germany economy in the midst of a host of weak services-oriented European economies (seeA Hitchcockian nightmare: Europe falling off a cliff). And Germany's dynamic automobile industry epitomizes this.
I tend to think of BMW and Daimler as being the strongest German automotive brands.This is partly because they are towards the top end of the luxury spectrum and partly because – being positioned towards the luxury end – they have been pioneers of increasing electronic content within automobiles. The participation of BMW and Mercedes (Daimler's automobile brand) in Formula 1, grand prix racing has probably also helped.
However, a news item from last week helps remind us that Volkswagen (VW) is in many ways a bigger success story in both Germany's and the world's automotive sector. VW announced last week that the deal has been agreed for it to acquire the 50.1 percent stake it doesn’t already own in German sports car maker Porsche. It's a bit like the story of the hare and the tortoise.
VW – of people's car, beetle and microbus fame – has always been much more proletarian that any of those other German brands, but it also wholly owns brands such as Audi, as well as SEAT and Skoda. Now VW is set to pay 4.4 billion euro (about $5.6 billion) to wrap up Porsche in a move that will help cement its role as one of the big three carmakers alongside General Motors and Toyota.
It is notable that there is one of the top three from the United States, one from Europe and one from Japan. The likes of BMW and Daimler come much further down the rankings in terms of volume of cars supplied each year.
And in many ways it is those volumes that are important. Electronics is in all vehicles these days. But while Mercedes and BMW may be fine tweaking the smart-card protected and personalized heated passenger sear, Volkswagen has been taking the essentials of electronic utlility and safety and applying them to convenient transport across the world including South America and China. And Volkswagen are reportedly very big in Brazil and China.
Of course, it is arguable as to how green is the proliferation of automobile transport around the world but we who enjoy the convenience of personal transport are in no moral position to dictate that others should not also have it. And Volkswagen is providing that capability with global success, in a way that rivals the success of Airbus in aerospace. And the likes of Airbus, Volkswagen, Audi, Mercedes-Benz, BMW and the rest all provide opportunities for European sales of electronics and semiconductors.
Europe needs more success stories like Volkswagen if it is to crawl out of the wreckage of its own economic car crash.
When will Volkswagen become an environmental efficiency leader in the USA? Years ago (despite the air cooled engine pollution issues), the Beetle got remarkable miles per gallon (MPG) performance. Two years ago I drove a large Audi A6 in Portugal with an auto-stop "green" diesel engine that got 50 mpg. Why doesn't the company give their Japanese competitors an environmental competitive challenge in the USA? They could do it and once again become the people's car...
ja wohl. and you would get extra brownie points for guessing who was Ferdinand Porsche's co - designer e,g. to make the Bug rear wheel drive w/ air - cooled motor.
clue : Porsche's co - designer for the VW was also another Austrian
Well, of the new big three, there is no question who has the most entertaining commericials! However, in the US VW still is a distant 9th.
VW 0.15M-Audi 0.065M-Porsche 0.016M
The other point is, though, that this article puts a positive spin on the disappearance of another European car company, in this case Porsche. I've also read disquiting recent rumors concerning Ford and GM of Europe, also looking at retrenching. This is unfortunate, as some of the best Fords and GMs come from their European design centers. Such as, the Opel Epsilon platform, for example.
In spite of the positive spin, the German economy appears to be having some of the same problems as the Chinese. Reduced global demand for their products.
It will also be very instructive to see where Francois Hollande's socialist policies bring France. Honestly, it looks so obvious from my perspective anyway, any economy that seems to be more similar to the US system does better in the longer term. (Well, let's say the "traditional" US system, if not what we are witnessing these days.) And this includes the way China has been changing, gradually.
Less reliance on central planning, less reliance on government as the primary employer, less punishment of entrepeneurs.
On an odd side note, mostly unrelated, apparently the Chinese government these days encourages young mothers to NOT breastfeed their babies. How strange is that? Especially considering the tainted baby formula fiasco?
That's an agency problem Streetrodder, your voice is taken over by either bigger shareholders who are mostly in it for a quick buck or by executives who have highjacked your shares for a quick buck too.